Opinion
33396.
DECIDED FEBRUARY 1, 1951.
Complaint; from Fulton Superior Court — Judge Moore. October 11, 1950.
Poole, Pearce Hall, Edwin Pearce, W. L. Bryan, for plaintiff in error.
Alston, Foster, Sibley Miller, William B. Spann Jr., contra.
1. ( a) As to facts charged which cannot be presumed to be within the knowledge of the opposite party, a paragraph of an answer in the language of Code § 81-103, that for want of sufficient information the defendant can neither admit nor deny the averment, and that he demands strict proof thereof, is equivalent to a denial.
( b) A denial of an allegation of ownership in a sworn pleading is sufficient to put the plaintiff on proof of such ownership, and therefore to make an issue of fact for the jury where, as here, the plaintiff alleges ownership of checks payable to a third party and sets out no transfer or assignment of such checks.
2. ( a) The plea of recoupment is applicable where the parties rely on the same contract, and the plea of setoff is applicable where they urge different contracts.
( b) Where the plaintiff has a legal right to sue upon a contract, the defendant has a correlative right to defend under the same contract, although a part of it may be oral and another part in writing, and the plaintiff cannot rely upon the statute of limitations in order to avoid the defendant's defense.
( c) Where, however, the defendant attempts to set off matter of an affirmative nature which would entitle him to damages against the plaintiff, but which does not arise out of the mutual stipulations or independent covenants of the contract sued upon, the statute of limitations is applicable, the plea being one of setoff.
( d) Here the matter contained in the defendant's cross-action was barred by the statute of limitations.
3. Where error is assigned on the judgment of the trial court disallowing an amendment, and the substance of the amendment is not brought up, either in the record or the bill of exceptions, no question is presented for decision.
DECIDED FEBRUARY 1, 1951.
The defendant in error, H. Ralph Ringe, herein referred to as the plaintiff, filed suit in the Superior Court of Fulton County against Seymour B. Byrom, plaintiff in error, herein referred to as the defendant, for the sum of $12,780. The petition of the plaintiff, which was not verified, alleges in part that he is a member of the firm of Basham, Ringe and Correa, a partnership doing business in Mexico City, Mexico; that on or about December 4, 1942, December 8, 1942 and December 10, 1942, the defendant presented his checks in the sum of $2000, $3000 and $4000 respectively, all payable to Basham, Ringe and Correa, drawn on the Bank of Byromville, and signed, "Atlanta Band Mill by Seymour B. Byrom", that being the name under which the defendant was doing business as an individual; that each of said checks was cashed by the firm of which the plaintiff is a member and that the defendant received the cash represented by the checks from the payee upon instructions from the plaintiff; that the plaintiff indorsed the checks for the firm by his personal signature and they were deposited to the credit of his firm in the Mexico City branch of the National City Bank of New York; that when the checks reached the Bank of Byromville, payment was refused because of insufficient funds. The checks were then returned to the Mexico City branch of the National City Bank of New York and returned to the payee by it. Paragraph 11 of the petition is as follows: "Petitioner, having been responsible for the cashing of said checks by the firm of Basham, Ringe and Correa, refunded the sum of $9000 to said firm from his personal funds and became and still is the owner of said dishonored checks." The prayer is for judgment for the sum of $9000 principal and $3780 interest at the rate of 7% per annum for six years. Copies of the checks sued upon are attached as exhibits and contain the following indorsement: "Pay to the order of National City Bank of New York, Mexico City Branch. Value Received. Basham, Ringe and Correa by H. Ralph Ringe."
To this petition the defendant filed a verified pleading which he styled, "Plea, answer and cross-bill of defendant," in which he admits jurisdiction, the firm name of the plaintiff and defendant, that the said checks were returned for insufficient funds, that demand was refused, that other checks were previously cashed, and the execution and indorsement of the checks. He denies the indebtedness, but admits receiving the sums of $2000, $3000 and $4000. As to paragraph 11, "For lack of information defendant can neither admit nor deny the allegations of paragraph 11 and demands strict proof of same." For further answer he sets up substantially the following facts: that the defendant had negotiated an agreement with a corporation known as Resources Corporation International, which was the owner of valuable Mexican timber lands, to cut timber therefrom; that to effectuate the agreement it was necessary for the defendant to form a Mexican corporation which would enter into a contract with a citizen of Mexico required to hold legal title to the tract, and designated the nominee of the corporation; that Antonio Correa, a member of the plaintiff's law firm, was the nominee; that at the corporation's suggestion the defendant retained this law firm to represent him in this matter, including drawing the corporation contract, and signing, registering and recording the same; that he did form a corporation for this purpose known as Cia. Maderera Central S.A., of which he was president and director, the remaining members being members or employees of the law firm; that the contract was prepared and signed by the defendant and left with the law firm to be executed by the nominee Correa; that the value of the contract was more than $100,000, and defendant actually spent more than $60,000 in performing obligations and carrying out his part thereof; that he in no wise defaulted thereon, but that the law firm, on secret instructions from the corporation owner of the timber withheld execution and recordation of it upon false and groundless claims of a default by him; that said law firm purported to represent him but was fraudulently and unethically representing the corporation owner at his expense; that the law firm refuses to advise him as to whether Correa, nominee of the corporation and member of the law firm, ever did sign the contract as agreed, but they did withhold it from record without advising the defendant of this fact and "refused to deal further with defendant although defendant did not find out about this failure to register until the damage had been done"; that the law firm of Basham, Ringe Correa, Ringe and Correa individually, and the corporation, were all co-conspirators in this scheme, they intending to take from the defendant the value of the contract, and as a result of their false and fraudulent acts the defendant has lost the full value of the contract. There is considerable amplification of these allegations in an effort to show that the law firm reversed their position from time to time as to the default, and their acts misled the defendant and caused him to refuse an offer of $90,000 for his own Mexican corporation. He alleges damages in excess of $1850 in traveling expenses and attorney fees made necessary by a trip to Mexico to ascertain the facts set out, $5000 paid to said law firm as attorney's fees; that the members of the law firm are non-residents of the United States, that a confidential relation existed between them and the defendant, and that many of the details of the facts alleged are in their exclusive knowledge and unavailable to the defendant.
General and special demurrers were filed to this pleading. Before hearing thereon the defendant amended his petition. Paragraphs 45 and 46 of this amendment read as follows: "Defendant further shows that the subject-matter of the plaintiff's petition was part of the transaction between plaintiff and defendant mentioned in paragraph 15 of this plea and answer [referring to the drawing and registering of the contract] and that one of the things which said law firm was to do in its relationship with defendant was to give financial assistance of the type set out in plaintiff's petition, and that the transactions mentioned in plaintiff's petition grew out of and were part of the arrangement between defendant, plaintiff, and the said law firm of Basham, Ringe and Correa, as more fully set out in preceding paragraphs of this plea and answer. Defendant shows that by virtue of the foregoing facts defendant is entitled to have said damages allowed by way of recoupment against any amounts for which defendant might otherwise be liable." The defendant struck the word "cross-action" from his designation of his pleading. Renewed demurrers were filed, and defendant thereafter, before hearing, filed a second amendment. He alleged that Ringe and the law firm kept all the books and records of the defendant's corporation and transacted most of its business in their offices, that the checks set out in plaintiff's suit were not isolated transactions for the accommodation of the defendant, but were a part of continuous activities in connection with the operation of the corporation by the defendant and plaintiff in said law firm. A number of activities were listed. Defendant had occasion to give many checks to said law firm, more than $25,000 worth in addition to those sued on, funds from which were utilized in paying expenses incurred in connection with the operation of the corporation and timber-cutting venture. One of the expenses was payment of attorney fees to said law firm. "The checks sued on in plaintiff's petition are part of this continuous operation and the proceeds of said checks were used for expenses in connection with said corporation and said venture in the manner described above." It is alleged that a consideration of the dishonest acts of plaintiff and the said law firm and the consequent damages to defendant would be a proper and necessary part of any accounting between the parties or any transaction instituted on any segment of their agreement and transactions in pursuance thereof. The allegations of this amendment were demurred to as conclusions. Upon hearing, the three demurrers were sustained on every ground, and the defendant's answer as amended was dismissed. Exceptions pendente lite were preserved to this ruling. A third amendment was offered, and on April 30, 1949, the following judgment was entered: "The judgment of this court dated April 2, 1949 having stricken the defendant's answer, the above and foregoing amendment is not allowed." Exceptions were preserved to this ruling. Thereafter the case was heard by the judge without the intervention of a jury and judgment entered up for the plaintiff as by default. The defendant assigns error on the judgments striking his answer and disallowing his subsequent amendment as being hurtful and affecting and controlling the final judgment in said case.
1. Code § 81-103 states in part as follows: "Any averment distinctly and plainly made [in a petition] which is not denied by the defendant's answer shall be taken as prima facie true, unless the defendant shall state in his answer that he can neither admit nor deny such averment because of the want of sufficient information." Code § 81-308 states as follows: "Where facts are charged to be within the knowledge of a party, or where from all the circumstances such knowledge is necessarily presumed, and he fails to answer altogether, or makes an evasive answer, the charge is to be taken as true." It is contended by the defendant that the checks sued upon do not appear on their face to belong to the plaintiff, there being no written assignment from the law firm to the plaintiff, and that the defendant, not being a party to any transfer of the checks from the law firm to the plaintiff individually, had no means of knowing whether or not such a transfer had in fact taken place so as to make the plaintiff the owner of the checks as alleged, this being peculiarly within the plaintiff's knowledge. The defendant therefore contends that, under Code § 81-103, he had a right to neither admit nor deny, for lack of information; that he did so, demanding strict proof; that this created an issue of fact, for which reason it was error for the trial court to strike the entire answer. This contention is sound. Where a fact is peculiarly within the knowledge of the opposite party, the pleader may refuse to admit or deny for lack of information, and demand proof of such allegation. Such an answer is not demurrable. Green v. Rountree, 155 Ga. 1 (1) ( 116 S.E. 116). Nor does it amount to a plea of the general issue. In Wardlaw v. Chattanooga Savings Bank, 31 Ga. App. 749 ( 121 S.E. 871), paragraphs merely denying the allegations of the petition were held to be a mere plea of the general issue, presenting no defense, but in that case the petition did not allege that the plaintiff was the transferee of the note sued on, in consequence of which the denials of the allegations of the petition did not constitute a denial of any transfer, or of the plaintiff's right to sue based on this ground. The amendment offered by the defendant also "did not deny that the plaintiff was the lawful and bona fide holder of the note," as the court pointed out, and for that reason failed to set up any issuable defense and was properly stricken. On the other hand, it is stated in Georgia Fertilizer Co. v. Foster, 40 Ga. App. 436 ( 149 S.E. 812) that "a mere general denial, in a plea sworn to by a defendant, of a paragraph in the plaintiff's petition in which the plaintiff alleges that he is the owner of choses in action sued on, and that they had been transferred by a written assignment executed by a named corporation, who was their original owner, to named assignees, who afterwards, by a written assignment had assigned them to the plaintiff, would be a sufficient denial, as required in section 4299 of the Civil Code of 1910 [ § 20-805, Code of 1933] of the genuineness of the assignment." Although Code § 20-805 is based on an act referring expressly to assignments in writing, there is nevertheless no good reason for distinguishing between an allegation of ownership and an allegation of ownership based on a written assignment. Paragraph 11, alleging that the plaintiff was the owner of the checks, was not demurred to and that question is not before us. The answer to paragraph 11 was equivalent to a denial, under Code § 81-103, and a sworn denial of the assignment or ownership of the instrument is sufficient to place this fact in issue and put the plaintiff upon his proof. Accordingly, the trial court erred in striking so much of the answer as demanded strict proof of the plaintiff's ownership of the note. If the plaintiff was not the owner, payment by the defendant would have been no defense against another suit by the true owner. Carter v. Haralson, 146 Ga. 282 ( 91 S.E. 88).
2. It is noted that the plaintiff here took the checks sued upon with notice and after dishonor, and for this reason the defendant may plead any defense against Ringe which would be a good defense if urged against the law firm of which Ringe was a member. The plaintiff contends, however, that the transactions which the defendant seeks to set up as entitling him to affirmative relief, even if they were a valid setoff, which is denied, are barred by the statute of limitations. The defendant contends that he is seeking to recoup damages growing out of the same contract — the contract of employment of the attorneys to represent him in Mexico — and, this being the case, he is entitled to set up any matter under the same contract upon which the plaintiff sues. It has frequently been held that as long as a plaintiff has the legal right to sue upon a contract the defendant has a correlative right to defend, and the plaintiff cannot insist upon the statute of limitations in order to avoid the defendant's defense, although a part of the contract may be oral and another part of the same contract in writing, so that, if they were different contracts, different statutes of limitation would apply. See Swindell v. Bainbridge State Bank, 3 Ga. App. 364, 371 ( 60 S.E. 13); Morrow v. Hanson, 9 Ga. 398 (54 Am. D. 346). Ordinarily the difference between recoupment and setoff is of little importance. The scheme of the Code is to recoup where both parties rely on the same contract, and set off where they urge different contracts. Fontaine v. Baxley, 90 Ga. 416, 427 ( 17 S.E. 1015); Code, §§ 20-1311, 20-1312. Where the plaintiff sues on one part of a contract consisting of mutual stipulations made at the same time and relating to the same subject-matter, the defendant may recoup his damages arising from the breach of that part which is in his favor. Mell v. Moony, 30 Ga. 413; Alpharetta Feed Co. Inc. v. Cocke, 82 Ga. App. 718, 727 ( 62 S.E.2d 642). In a plea of recoupment the averments must be as full and clear as though they were set up in the original demand. Atlanta Glass Co. v. Noizet, 88 Ga. 43, 45 ( 13 S.E. 833).
Considering these rules of law, it must be decided whether the defendant in his cross-action in this case has set up, as fully and distinctly as though he had brought the proceedings in the first instance, a contract between himself and the plaintiff's law firm providing for mutual stipulations or independent covenants, one of which, in order to withstand the demurrer, must be to the effect that in consideration of the employment of the plaintiff's law firm by the defendant, they not only agreed to set up a corporation, execute and record a certain contract, and represent the defendant in any of the other ways stated in the petition, but also that they would cash his checks and thus keep him supplied with funds necessary and incident to the carrying on of his business ventures. Otherwise, although their action in cashing his checks at his request might have been a reasonable and logical result of their association together, it was certainly no part of their contract of employment. And if the law firm violated its contract of employment by conspiring with the opposite party in this business venture to defraud the defendant, as alleged, and such matter might sustain a cause of action or be set off against demands of the plaintiff, such a situation would not, unless arising under the same contract, act to toll the statute of limitations. For example, if the firm of Basham, Ringe and Correa had sued the defendant for attorney fees on a note given by the defendant to them, he would have had a right, regardless of the time element, to set up matter of defense such as he attempts to plead here. It is true that there are certain phrases scattered through the answer which, if construed favorably to the pleader, might tend to support his view, such as that one of the things the law firm was to do in its relationship with the defendant was to give financial assistance "of the type set out in plaintiff's petition," that the transactions "grew out of and were part of" the arrangement between the parties, that they were not isolated transactions but a part of continuous activities in connection with the operation of the corporation; that the defendant had given over 30 checks to the law firm in excess of $25,000 in addition to the checks sued on, and that the proceeds of these checks were used for expenses in connection with the timber-cutting venture, attorney fees and so forth; that the proceeds were used "in connection with said corporation and said venture in the manner described above." This pleading, in connection with the other allegations, is equivocal, and when construed unfavorably to the pleader says no more than that during the course of the relationship and transactions between them the law firm cashed a number of checks for the defendant, who used the proceeds for expenses in connection with the business in regard to which he had retained them (but which was nevertheless his own personal business), that the proceeds of some of the checks, but not the ones sued upon, were used to pay attorney fees, and that there was a general arrangement between the parties in the course of these transactions as a result of which the law firm cashed a number of his checks. It is nowhere stated that as a part of the contract of employment the law firm agreed to cash its client's checks for him, or that any specific amount of money, or time for demanding or obtaining it was ever contemplated. It does not appear that if the law firm had found itself at any time unable to cash one of the checks presented by the defendant this would have constituted a breach of the contract of employment. The law firm might well have cashed the defendant's personal checks because of the existence of the contract, although not obligated to do so under its terms. The doing of an independent act, even though the act would not have been done except for a contract between the parties, does not constitute a performance under the contract. Smith v. Davidson, 198 Ga. 231, 238 ( 31 S.E.2d 477); Lamons v. Good Foods Inc., 195 Ga. 475 ( 24 S.E.2d 678). No contract is set out anywhere in the cross-action which, strictly and reasonably construed, showed any obligation on the part of the law firm to cash checks for the defendant at his demand. This being so, the checks themselves constitute a contract independent of the contract of employment, although undoubtedly arising as a result of it, and the plea is properly one of setoff and not of recoupment. The demands set up in the cross-action show that they arise under an oral contract, on which the statute of limitations is four years. The contract which the defendant signed and left with the law firm to complete and record was executed by him in October, 1942, and the contract of employment was apparently breached at that time, or soon thereafter, when the law firm failed to complete and record it according to the defendant's instructions. The allegations as to time are generally vague and indefinite, but the defendant alleged that approximately a year thereafter he returned to Mexico "to confront the said plaintiff and bring out the truth of the facts," and learned for the first time the truth of the activities of the law firm and the plaintiff with reference to the execution and recording of this contract. The petition was filed on December 2, 1948, more than six years after the defendant signed the contract and more than five years after he returned to Mexico and had a showdown with the attorneys.
The statute of limitations is applicable to a plea of setoff. Brown v. Winship, 20 Ga. 693, 695: Brewer v. Grogan, 116 Ga. 60 ( 42 S.E. 525); Finney v. Brumby, 64 Ga. 510 (1); Mobley v. Murray County, 178 Ga. 388 ( 173 S.E. 680). Accordingly, the matter set up in the cross-action was barred by the statute of limitations and the trial court did not err in sustaining the general demurrer on this ground.
3. Error is assigned on the action of the trial court in refusing to allow an amendment offered after the general demurrer had been sustained. The amendment so disallowed is not a part of the record and is not set out in the bill of exceptions. Accordingly, this presents no question for decision by this court, but, as the case is reversed because the trial court erred in striking the defendant's answer in its entirety, the defendant may, after the return of this remittitur, properly present an amendment to the court for allowance if he so desires.
The trial court erred in striking the answer of the defendant to the plaintiff's petition. The trial court did not err in striking paragraphs 10 through 51 of the defendant's pleading containing his plea of setoff.
Judgment reversed in part and affirmed in part. MacIntyre, P. J., and Gardner, J., concur.